Indian car industry is already facing hurdles in the market. Now, it is going to experience further obstacles with the increase of interest rate for auto loans. The RBI has tightened its monetary policy to combat the current inflation.
The RBI has increased the short-term inter-bank lending rates (Repo Rate) and mandatory cash reserve (CRR) by 0.50 % and 0.25 %, respectively. Subsequent to the RBI’s decision, the lending bankers have already specified that interest rates for borrowers would go up by about 1%.
According to Mr. P Balendran, General Motors India Vice President (Corporate Affairs), “Market is already lethargic and going through a slowdown. It may go down further, even beyond last year's deceleration. The possible interest rate hike would affect the small car segment most.”
He also added that the growth is occurring only in the small car segment. People buying small cars are more price conscious, so any hike in interest rates will affect the sales.
Mr. Arvind Saxena, Senior Vice-President (Sales and Marketing), Hyundai Motor India, also commented that the growth of the automobile industry would come down to single digit from a double-digit as it witnessed last fiscal.
Mr. Shekar Viswanathan, Senior Vice-President (Sales and Marketing), Toyota Kirloskar Motor expressing the same sentiments said, “Though this will not have much impact on us, but surely the industry is going to be affected, mainly the small car market.”
Many auto manufacturers, domestic as well as global, have proclaimed to launch a series of small cars in Indian car market. This might hamper their growth in small car segment.